Can a Non-Resident of the United States and/or a Foreign Entity Form or Own an LLC?

 Yes. Generally, there are no restrictions to state-specific LLC laws that would serve to limit who can form a limited liability company or who can own a membership interest in an existing LLC, and there is no law that requires U.S. citizenship or a green card to do so.

Therefore, a non-resident of the U.S. is free to form an LLC under the laws of any state he/she chooses to register the LLC in.  Further, there is no requirement that the activities of the LLC be managed from within the United States or even that its activities be conducted within the United States. This means that a foreign individual can form and operate a properly registered U.S. LLC from wherever he/she happens to be.

Similarly, an entity based outside the U.S. may form and own a limited liability company in the United States, as long as all requirements for registration in the state of formation are also met. Many times this includes having a registered agent with a physical presence and location active within whichever state the LLC is incorporated in. If all members of the LLC are not physically located within whichever state the LLC is incorporated, or are based internationally, many individuals and entities use a state-specific service which provides for a registered agent in order to meet this requirement.

However, it needs to be noted that although a non-resident of the U.S. can form and own an LLC generally, there are some restrictions on the ownership of certain entities under various state laws that may restrict ownership for reasons other than citizenship or residency.

• For example, various state law(s) may require that all members of an LLC engaging in the practice of medicine be licensed physicians in that state or all members of an LLC engaging in the practice of law be licensed attorneys, etc.

The Issue of Taxation

Additionally, there are always going to be tax considerations to conducting any form of business in the U.S. and an LLC is no exception.

(*Please note that nothing in this blog or elsewhere on this site should be taken as tax advice. All the information contained herein is informative only, and should you need specific information as to current tax issues or laws, please consult with a qualified tax professional)

United States Tax laws require that foreigners pay taxes on any earnings made in the United States. Regardless of immigration status, the United States will allow foreigners to form a company as long as they have registered for a Taxpayer Identification Number. When there is a foreign partner in an LLC, that partner must have a US Taxpayer Identification Number (“ITIN”). This must be obtained if the LLC is engaged in a US trade or business (i.e., if it will make money).

In addition, some requirements, such as obtaining a Federal Employer Identification Number (FEIN) from the Internal Revenue Service (IRS), are more complicated if the only members are non-resident aliens. The application for the FEIN, Form SS-4, requires the name and taxpayer identification number for one member of the LLC.  The taxpayer ID for U.S. citizens is normally their social security number, which a non-resident alien would not have. In order to complete Form SS-4 and receive a FEIN for the LLC, a non-resident alien would need to obtain an individual tax identification number (ITIN) prior to submitting the Form SS-4.

S Corporation Election Not Available

Even though a non-resident of the United States can own an interest in an LLC formed in the U.S., there is one caveat that must be noted. Frequently, members of an LLC find that they can reduce their overall tax burden by electing to have the LLC treated as an S Corporation for Federal tax purposes. To elect S Corporation treatment, the LLC must meet all of the same restrictions that a corporation must meet. One of those restrictions is that no members of the LLC can be non-resident aliens. Therefore, having even one member who is non-US resident and not a citizen of the United States will prevent the LLC from electing to be treated as an S Corporation.

Reporting and Taxes

The foreign partner of a US LLC will be deemed to be engaged in a US trade or business and the LLC must withhold 35% of its profits for taxes, paid and filed on a quarterly basis to the IRS. Even though the partnership itself does not pay income taxes, it must file Form 1065 with the IRS even if there is no profit. This form is an informational return the IRS reviews to determine whether the partners are reporting their income correctly. The partnership must also provide a Schedule K-1 to the IRS and to each partner, which breaks down each partner’s share of the business’s profits and losses. In turn, each partner reports this profit and loss information on their individual tax return.

As stated above, the LLC cannot choose to be taxed as an S Corp. since foreign citizens may not be partners or owners in an S Corporation in accordance with US law.  It may, however, choose to be taxed as a C Corporation (the standard, default, familiar corporation we all know about).

When do Foreign Owners need a Visa?

While foreigners can be owners of an LLC that operates in the United States without a visa, if they wish to work for the company within the country, they will need to obtain one. Foreign owners could work as a corporate officer or consultants for a US Company without a visa, but in this case, they must be outside of the United States. Otherwise, they cannot receive a salary or compensation for services provided in the United States unless the foreign citizen has a work permit issued by the United States. For a foreign citizen who simply wants to do business in the US, a B-1 visa is usually the right option to apply for, as it is meant for foreigners who wish to consult with business associates, attend professional or business conventions, or negotiate a contract. The B-1 visa is more for foreign persons looking to invest in the US rather than work in the US. Besides the B-1, you could also apply for an immigrant Visa like the E3 that will allow skilled workers or professionals to immigrate to and work in the US.

*Disclaimer: The above copied information is for educational use only and should not be construed as legal or tax advice. For your specific situation, we highly encourage you to consult with a business attorney or legal advisor and a qualified tax professional before making any business decisions.